Stocks registered a rough week in the face of record corporate profits.
446 of the 500 S&P 500 companies have now reported quarterly earnings, with 80% beating analysts’ estimates. According to the Wall Street Journal, it has been the highest outperformance since Spring 2021.
So why did the market fall last week? Concerns are mounting, including the record long government shutdown, last week’s layoff announcements, weak job growth, tariff concerns, high stock market valuations, inflation concerns, and increasing negative consumer sentiment.
Market Snapshot
Markets pulled back meaningfully as multiple concerns converged:
- Dow Jones Industrial Average: –2.01%
- S&P 500: –2.73%
- Nasdaq Composite: –4.43%
- Russell 2000: –3.52%
- Foreign Stocks: –0.88%
- Emerging Markets: –2.33%
The 10-Year U.S. Treasury yield closed the week at 4.093%, remaining range-bound but near the lower end.
What’s Weighing on Markets?
Several overlapping headwinds may explain the disconnect between earnings strength and market performance:
1. Government Shutdown (Still Ongoing… But Maybe Not for Long?)
We’re now over 40 days into the longest government shutdown on record. Key impacts include:
- Over 670,000 federal employees furloughed, with another 730,000 working without pay
- Flight cancellations rising as the FAA curtails operations
- SNAP benefit disruptions putting millions of households at risk
- Local job losses and slower retail activity in federal employment hubs
As of this morning, Monday the 10th, it appears an end to the 40+ day shutdown is finally in sight.
2. Layoffs at 20-Year High
U.S. employers announced over 150,000 job cuts last week — the highest monthly figure in two decades.
Common reasons? Cost-cutting, softening demand, and growing adoption of AI automation. Time will tell whether this marks a structural shift or a temporary adjustment.
3. Tariff Uncertainty and Legal Pushback
Recent court proceedings are challenging the legality of the current tariff policy. While the outcome is pending, early opinions suggest limitations on executive authority. Even if the court rules against the tariffs, the administration has other options to continue with their objective.
4. Elevated Stock Market Valuations
High stock market valuations are always a concern. However, when profits are increasing, valuations typically continue to rise, anticipating higher profits going forward. As markets continue to rise over time, we should expect to see pullbacks and corrections like last week’s, as they are a normal part of the process.
5. Inflation: The Numbers vs. the Experience
According to our government, inflation pressures are falling. Personally, I am challenged to believe this at face value. Food, Travel, Healthcare, and more appear to disagree with our administration.
6. Falling Consumer Sentiment, Resilient Spending (For Now)
Consumer sentiment can often be swayed one way or another by the media. Even the Wall Street Journal and Barrons sometimes suggest some political bias in their opinions. As sentiment continues to fall, consumer spending has not fallen. At least not yet.
What’s on Deck This Week
Several data releases and earnings reports could shift sentiment again:
- Small Business Optimism Index
- Weekly Mortgage Applications
- Initial Jobless Claims
- Core CPI and PPI (inflation gauges)
- Retail Sales Report
- Earnings from 54 S&P 500 firms, including Walmart and Nvidia
Final Thoughts
We’re now in the home stretch for the end of 2025. With only a handful of weeks remaining, we’ll begin to hear forecasts for the economy and markets in 2026.
Between the government shutdown, ongoing tariff uncertainty, shifting job market, and a still-unsettled inflation picture, there’s no shortage of headlines. While short-term volatility can feel unsettling, pullbacks and corrections are a normal part of long-term investing.
As always, thank you for reading. Please consider sharing the Weekly Retirement Blog with friends, family, or colleagues who may benefit from staying informed.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All market data sourced from The Wall Street Journal, November 7, 2025.
